A worker at a steel company in Lianyungang, Jiangsu province, in January 2015. (Photo/China Daily)
Amid unsettling factors like U.S. protectionism, overcapacity and low profits, China's iron and steel industry finds ways to stay afloat
China's iron and steel industry has reached a crossroads after having ridden both the wave of export growth and the boom in domestic housing market for more than two decades.
The industry is facing multiple challenges now. Overcapacity has been a bugbear for a while. Low profit has been a related headache. And angry foreign counterparts, who are struggling to keep their employees in their stations, fill the industry's cup of woes.
Officials said the country will continue to cut overcapacity and readjust the industry's production structure to help both domestic and global steel manufacturers out of the woods despite a surge in prices over the past two months.
Shen Danyang, spokesman for the Ministry of Commerce, said the surge has been caused by the rise in iron ore prices in global markets. Increased activity in the infrastructure sector is also boosting both domestic and global demand for steel products.
His explanation came after international media reported that global steel prices on average had risen from $305 per metric ton earlier this year to $365 in April because China had cut between 150 million tons and 200 million tons of steel and iron production capacity to tackle the issue of overcapacity.
"From an international perspective, along with the gradual recovery of the world economy, the demand for steel increased," said Shen. "Besides, the rising iron-ore prices have also raised the cost of steel products. China's infrastructure projects are apparently supporting the demand for steel from domestic users."
China aims to reduce crude steel production by 100 to 150 million tons over the next five years. It also encourages steel makers to work with downstream steel consumers to promote the use of high-quality steel products in various sectors, from auto and machinery manufacturing to power and offshore engineering equipment.
Eager to stay alive, Liaoning-based Ansteel Group opened a new steel plant last month for high-end steel products used in auto and home appliance manufacturing as the steel maker seeks to improve its product offerings amid oversupply of low-end steel and weak demand.
The new plant, based in Guangzhou, capital of South China's Guangdong province, is part of a joint venture Ansteel formed with Guangzhou Automobile Group Co and ThyssenKrupp AG to tap into steel demand from automakers.
The first stage of the plant cost 1.5 billion yuan ($230 million) and aims for annual production of 450,000 tons of steel plates used in vehicles and high-quality home appliances.